This post was originally published in The Times newspaper on Tuesday, June 12th 2012 (Here’s a link to the original post). Reposting on VC Cafe.
The UK has everything it needs to build great startups. Of course, the European venture capital industry is filled with challenges, including a negative average return of 1.9 per cent in the past decade compared with 8.4 per cent in the United States. That said, talent, money and ideas, the trinity of startup success, are all present in the UK.
London has the largest venture capital and private equity industries in Europe. The city’s cultural vibe attracts global talent, and the UK enjoys far more public sector support than the US. So what’s holding back the UK from growing successful startups?
Culture and appetite for risk have a big impact in the decision to become an entrepreneur. A survey for the National Centre for Entrepreneurship in Education suggests that while 77 per cent of universities provide support for student enterprise and graduate entrepreneurship, only 16 per cent of students are engaged in enterprise or entrepreneurship activity. This compares with a 24 per cent student engagement rate across Europe.
Encouragingly, this lack of interest in, or access to, enterprise and entrepreneurship education within British universities is now being addressed. Initiatives such as the £82 million Startup Loan scheme, providing young people aged 18 to 24 with £2,500 of startup capital, are helpful, but we need to go farther and develop more appetite for risk among entrepreneurs and investors alike. If the last economic crisis taught us anything, it is that “safety” is only in the eye of the beholder.
Last year I met Reid Hoffman, founder of LinkedIn and one of the most highly-respected and successful tech entrepreneurs in Silicon Valley. I asked him what he thought was missing from London’s start up ecosystem. What was holding us back from creating our own Silicon Valley? His reply: the Valley’s magic lies in its density of network.
In the UK we have all the components: founders, angels, VCs, mentors, but we simply don’t have enough density. Not enough founders are finding success and then investing it back into the startup community; not enough students are embracing entrepreneurship as a career path.
Google’s Campus, our seven-storey startup facility in East London, is providing a platform for increasing the density of network in London. Never before has the UK seen so many startups under one roof. Reaching a critical mass will not only increase the chances of serendipity, but will also start influencing the culture of what it means to be an entrepreneur here.
To attract talent into the startup industry (not only founders, but also developers, designers, business people) we need entrepreneurial success stories. Who are our British business role models? Sir Richard Branson, Lord Sugar and Brent Hoberman would probably make it high on the list, but — without wishing to knock their incredible business success — their ideas and execution took place over a decade ago in a different time and market. As the costs of creating a company drop year-on-year, and mentorship and support increase, we need new role models for aspiring entrepreneurs to emulate.
Israel sets an impressive example here. Despite having only seven million citizens, Israel has one of the largest number of startups per capita in the world, the most NASDAQ-listed companies outside the US and the highest amount of venture capital raised per capita: $237 in Israel versus $32 in the UK. Entrepreneurship is woven into the lives of younger generations, including popular culture. Mesudarim, one of Israel’s most popular TV shows, follows four high-school friends who build up and then sell their startup in Israel. That is the aspiration for high school pupils and college students, and that’s something we need in the UK.
The proverb says: “It takes a village to raise a child.” The same idea applies to technology startups. Accelerator programmes such as Seedcamp, Springboard, Oxygen and Launch48 improve the chances of startup success, largely because of the depth and quality of mentoring they provide.
Whether it’s technical advice on product and user experience, scaling a business or raising funding through equity, early-stage entrepreneurs need guidance at every stage. Only a minority of startups will apply and eventually participate in such programmes, but it’s important to make mentoring support widely available to improve the chances of success in a competitive ecosystem.
The UK has all the ingredients to grow successful startups. A can-do attitude and better team-playing have the potential to make all the difference, particularly by turning Silicon Roundabout into a truly vibrant, serendipitous hub.